𝗡𝗔𝗙𝗥𝗔 𝗜𝗺𝗽𝗼𝘀𝗲𝘀 𝗣𝗲𝗻𝗮𝗹𝘁𝘆 𝗼𝗻 𝗖𝗔 𝗡𝗲𝗲𝗿𝗮𝗷 𝗕𝗮𝗻𝘀𝗮𝗹 𝗳𝗼𝗿 𝗣𝗿𝗼𝗳𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹 𝗠𝗶𝘀𝗰𝗼𝗻𝗱𝘂𝗰𝘁 𝗶𝗻 𝗥𝗲𝗹𝗶𝗴𝗮𝗿𝗲 𝗙𝗶𝗻𝘃𝗲𝘀𝘁 𝗔𝘂𝗱𝗶𝘁 𝗦𝘂𝗺𝗺𝗮𝗿𝘆 𝗼𝗳 𝘁𝗵𝗲 𝗢𝗿𝗱𝗲𝗿 𝗣𝗮𝘀𝘀𝗲𝗱 𝗯𝘆 𝗡𝗔𝗙𝗥𝗔 (𝗡𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝗔𝘂𝘁𝗵𝗼𝗿𝗶𝘁𝘆) 𝗖𝗮𝘀𝗲: Religare Finvest Limited vs. CA Neeraj Bansal (FY 2017-18) [img:YxdnwW1aI]

𝗙𝗮𝘂𝗹𝘁 𝗮𝗻𝗱 𝗟𝗲𝗴𝗮𝗹 𝗕𝗮𝘀𝗶𝘀 The National Financial Reporting Authority (NAFRA) issued an order against CA Neeraj Bansal, a partner at SCV & Co. LLP, for professional misconduct in his role as the Statutory Auditor of Religare Finvest Limited (RFL) for the financial year 2017-18.

𝗩𝗶𝗼𝗹𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗦𝗲𝗰𝘁𝗶𝗼𝗻 𝟭𝟯𝟮 𝗼𝗳 𝘁𝗵𝗲 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 𝗔𝗰𝘁, 𝟮𝟬𝟭𝟯: Section 132(4) empowers NAFRA to impose penalties and debar professionals in cases of professional misconduct. CA Neeraj Bansal was found guilty of failing to meet the professional standards prescribed under the Standards on Auditing (SA) and Guidance Notes issued by ICAI.

𝗡𝗮𝘁𝘂𝗿𝗲 𝗼𝗳 𝗩𝗶𝗼𝗹𝗮𝘁𝗶𝗼𝗻𝘀: Failure to maintain professional skepticism and conduct a proper audit. Negligence in verifying fraudulent fund diversions by the promoters and key management personnel of RFL. Lack of due diligence in assessing the true financial position of the company, leading to misrepresentation of financial statements.

𝗗𝗲𝘁𝗮𝗶𝗹𝘀 𝗼𝗳 𝘁𝗵𝗲 𝗠𝗶𝘀𝘁𝗮𝗸𝗲 𝟭) 𝗙𝗮𝗶𝗹𝘂𝗿𝗲 𝘁𝗼 𝗗𝗲𝘁𝗲𝗰𝘁 𝗙𝘂𝗻𝗱 𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝗼𝗻: The audit failed to report irregularities in loans worth ₹2,473.66 crores advanced by RFL to group entities. These transactions were later found to be fraudulent diversions by the promoters.

𝟮) 𝗡𝗼𝗻-𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝘄𝗶𝘁𝗵 𝗦𝘁𝗮𝗻𝗱𝗮𝗿𝗱𝘀 𝗼𝗻 𝗔𝘂𝗱𝗶𝘁𝗶𝗻𝗴 (𝗦𝗔): 𝗦𝗔 𝟮𝟰𝟬 (𝗙𝗿𝗮𝘂𝗱 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀): Did not assess fraud risk factors adequately. 𝗦𝗔 𝟱𝟬𝟬 (𝗔𝘂𝗱𝗶𝘁 𝗘𝘃𝗶𝗱𝗲𝗻𝗰𝗲): Failed to obtain sufficient, appropriate audit evidence for loan transactions. 𝗦𝗔 𝟱𝟴𝟬 (𝗪𝗿𝗶𝘁𝘁𝗲𝗻 𝗥𝗲𝗽𝗿𝗲𝘀𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻𝘀): Improper reliance on management's explanations without cross-verification. 𝗦𝗔 𝟳𝟬𝟬 (𝗔𝘂𝗱𝗶𝘁 𝗥𝗲𝗽𝗼𝗿𝘁): Issued an unqualified audit opinion despite material misstatements in financial statements.

𝟯) 𝗣𝗿𝗼𝗳𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹 𝗠𝗶𝘀𝗰𝗼𝗻𝗱𝘂𝗰𝘁 𝗮𝗻𝗱 𝗚𝗿𝗼𝘀𝘀 𝗡𝗲𝗴𝗹𝗶𝗴𝗲𝗻𝗰𝗲: The auditor did not exercise due diligence in evaluating related-party transactions and loan impairments. The audit documentation was inadequate, failing to justify audit conclusions.

𝗣𝗲𝗻𝗮𝗹𝘁𝗶𝗲𝘀 𝗟𝗲𝘃𝗶𝗲𝗱 𝟭) 𝗖𝗔 𝗡𝗲𝗲𝗿𝗮𝗷 𝗕𝗮𝗻𝘀𝗮𝗹: Monetary Penalty: ₹5,00,000 (Under Section 132(4)(c) of the Companies Act, 2013). Debarment: Five-year ban from practicing as an auditor or being associated with any audit firm dealing with listed or large public interest entities. 𝟮) 𝗢𝘁𝗵𝗲𝗿 𝗖𝗼𝗻𝘀𝗲𝗾𝘂𝗲𝗻𝗰𝗲𝘀: ICAI (Institute of Chartered Accountants of India) may take further disciplinary action based on NAFRA's findings.